Page 2: Benefits of international trade
Buying and selling in overseas markets offers potential for businesses to develop and expand opportunities. Some of the key benefits are:
- greater sales volumes which, providing the business is trading profitably, will translate into higher profits
- an organisation’s ability to compete in several markets can improve through observing the range of trends in quality, product development, design and packaging
- an organisation can improve its reputation with UK customers and boost staff morale
- existing products and services can be introduced into new markets, even if they have become less popular in domestic markets
- the reliance a business has on its domestic market can be reduced, and, although risks themselves cannot be overcome, they can be spread. For example, if a business does most of its trade in US Dollars, it may want to start trading with Japan to spread the exchange rate risk between the Dollar and the Yen.
A key element in developing profitable business opportunities is being put in touch with the right people and making the best connections from the outset. Specialists at HSBC understand the problems and issues when developing businesses for overseas markets.
Identifying suitable markets
International trade involves recognising that people all over the world have different needs. Many products will only suit specific countries due to different values, customs, languages, technical standards and currencies. There is rarely such a thing as a global market, but rather a number of different overseas markets. In order to pinpoint markets where a business is most likely to be successful in selling its products, a lot of groundwork has to be done and advice sought. It is also just as important to identify unsuitable markets.
The nature and type of market an organisation is considering entering is particularly important. For example, some businesses might find a small market to be a useful way of slowly expanding into international markets, while for others, only a large market could provide them with the potential to realise their ambitions.
Another factor to consider is the speed at which the market is growing. It is usually easier to take a share of an expanding market than to fight for a share of a market that is already mature or declining. The quality of competition in some markets may make entering these markets difficult. Focusing on countries with fewer competitors might be more beneficial. The degree of similarity to the UK or other markets in which a business operates can also be valuable, as it can be hard for companies to break into markets lacking common ground.